ASX-listed Peak Rare Earths on Wednesday announced a binding scheme implementation deed with Ganzhou Chenguang Rare Earths New Material, a wholly owned subsidiary of Chinese rare earths major Shenghe Resources, under which Chenguang proposes to acquire 100% of the Tanzania-focused company.

The proposed acquisition includes a cash consideration of A$150.5-million, plus an amount equal to the proceeds raised from a non-renounceable entitlement offer of up to about A$7.5-million. This implies a total transaction value of A$158-million and a cash payment of about A$0.359 a Peak share, representing a near 200% premium to Peak’s closing price of A$0.12 a share on May 9, and a 160% premium to the 20-day volume-weighted average share price of A$0.138.

Peak’s independent board – excluding Shenghe-appointed director Shasha Lu – unanimously recommended the transaction in the absence of a superior proposal and subject to an independent expert concluding that the deal is in the best interests of shareholders.

“The proposed scheme offer price of a minimum of about A$0.359 represents an excellent outcome for shareholders and a 199% premium to Peak’s closing share price prior to announcement. The offer provides an opportunity for Peak shareholders to realise an attractive price for their shares and accelerate the realisation of the Ngualla project’s value," said Peak CEO Bardin Davis in the announcement.

Shenghe, which is listed on the Shanghai Stock Exchange and has a market capitalisation of about $2.9-billion, is already Peak’s biggest shareholder through its Singapore subsidiary, holding a 19.86% interest. Shenghe also has binding offtake rights to 100% of rare earth concentrate from Peak’s 84%-owned Ngualla rare earth project in Tanzania.

To ensure funding through the implementation period, Peak will undertake a pro-rata non-renounceable entitlement offer to raise up to A$7.5-million at A$0.10 a share. Shenghe Singapore has committed to subscribing for its full A$1.49-million entitlement under the offer.

Proceeds from the offer, along with existing cash and expected funds from the proposed sale of Peak’s Teesside site in the UK, will be used to support Ngualla-related costs, working capital, and transaction expenses.

The scheme is subject to various conditions, including shareholder, regulatory and court approvals, and is not conditional on the entitlement offer being fully subscribed or the Teesside sale being completed. However, if the funding falls short, Peak may need to consider alternative capital raising measures, potentially diluting existing shareholders and placing the scheme at risk.

“Having carefully evaluated the NGUK transaction and other alternative options to develop and fund the Ngualla project, we believe that the scheme delivers the best outcome currently available to shareholders on a risk-weighted basis. We are also mindful of the importance to Tanzania of developing the Ngualla project and believe that Shenghe is well positioned to partner with the government of Tanzania to successfully develop this world-class project," said Peak chairperson Russell Scrimshaw.

The company noted that a previously proposed joint venture between Peak and Shenghe under the NGUK structure – involving a A$96-million investment by Shenghe for a 50% interest in Peak’s UK-based subsidiary – was abandoned due to growing geopolitical and regulatory concerns. Peak believes the revised scheme structure offers greater transaction certainty and higher risk-adjusted value for shareholders.

An entitlement offer booklet with further details is expected to be released on May 26.